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Ontario 2012 Budget
Revision Adds 2% Personal Income Surtax

On April 23rd, the Ontario government announced in the
legislature that it would revise the budget to implement a 2% surtax on
personal taxable income in excess of $500,000, as a concession to the NDP
opposition party. The new Deficit-Fighting High-Income Tax Bracket
(as described by the Ministry of Finance) will have a rate of 12.16%
throughout 2012, as only half of the rate increase will apply for 2012.
The rate starting January 1, 2013 will be 13.16%. This is planned to be a temporary measure, to be eliminated when the
province is able to eliminate the budget deficit, expected to be in the
2017-18 budget year.

As a result of the existing surtaxes, which are based on
Ontario income tax payable, the marginal
tax rates for the tax bracket for 2012 for taxable income in excess of
$500,000 will be (combined Federal/Ontario):

Although the tax credit rate for donations in excess of $200
normally uses the rate from the highest tax bracket, the Ontario Taxation
Act, 2007, s. 21 has been revised to set this rate at 11.16%.

Ontario 2012 Budget - March 27, 2012

The budget states that "While some may argue for
tax increases, the McGuinty government will not take that path to balance
the budget". The province is taking measures to control costs,
including pay freezes for another 2 years for executives at hospitals,
colleges, universities, school boards and agencies, and for MPPs.

Ontario Corporate Income Tax (CIT) Rate

The CIT rate reductions planned for 2012 and 2013 will
be deferred until a balanced budget is achieved, which is scheduled for
2017-18. See our tables of corporate
tax rates.

Business Education Tax (BET) Reductions

It is proposed to temporarily freeze the BET reduction
plan, beginning in 2013. Rate reductions already implemented will
not be reversed. The government is committed to resuming BET rate
reductions when a balanced budget is achieved.

Public-Sector Defined Benefit Pension
Plans

The government believes that action must be taken now
to reduce the growth in pension costs, making public-sector pensions more
affordable for taxpayers and sustainable for pension plan members.

Most people don't seem to realize that the 2011 tax
return is being used to calculate their 2012 tax credits, which will
be paid out monthly, in advance, starting in July. Under the
old system, these credits would not be received until the 2012
tax return was filed in 2013.

Many people have said they would like the choice of
receiving these refundable tax credits either as monthly payments
throughout the year or as a single payment after the year has
ended. In the coming year, the government will look at options
for giving people that choice starting next year.